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tv   Worldwide Exchange  CNBC  June 14, 2013 4:00am-6:01am EDT

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you're watching worldwide exchange. i'm russ westgate. a start to the final trading day for a volatile week in europe and asia. taking a cue from wall street. encouraging data. white house aproproves plans to provide direct military support to military rebels. that could mean providing weapons. the announcement to top the agenda when g-8 leaders meet in northern ireland.
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we'll be in tehran. airbus arrival to the boeing dreamliner. is it taking off for its first test flight? right. i'll just show you these pictures. the a-350 xwb. first flight for that. competitor to air bus for the dreamliner has taken off on its maiden test flight. the latest pictures. a mixture of fans and employees, i presume, looking at that plane which has successfully launched up into the air. the first flight is the first ever for this new fuel efficient plane designed to compete
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necessarily with the dreamliner. comes at a pretty opportune time ahead of the paris air show as well. that is the picture of that plane still in the -- taking off. recent pretest flight successfully carried out, including the first -- rolls-royce xwb enjoins. that took place on june 2 books. t seating between 270 and 250 passengers. typically three class layout. this will bring up something of a step change for airbus in efficiency compared with aircraft in the current size category. they think they will use 25% less fuel with an equivalent reduction in co2 emissions. providing all goes well, it would be scheduled for entry into service in the second half of 2014. it's already won, this plane, 613 firm orders from 33
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customers worldwide. there it is. successfully up in the air. as i say, opportune ahead of the paris air show. talking of which, cnbc's phil lebeau will be at the paris air show just week bringing us interviews with leading ceos. follow our coverage at the pair air show at parisairshow.cnbc.com. what's the outlook for the asian giant? we'll be in delhi. iranian presidential elections take place today with six candidates hoping to succeed mahmoud ahmadinejad. a report from tehran. nbc's richard engel will have the latest from instan bull. they face the threat of what the government says will be its final crackdown. u.s. hotels have been voted the world's most luxurious
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places to stay. don't get too comfortable. which countries are looking for an upgrade. the global markets, of course. the update from singapore. >> thank you, russ. wall street finishing up in the green. asian markets picked up steam after the recent selloff. in japan the cabinet approved prime minister abe's structural reforms and pressed them to do more after the july elections. the nikkei pared back a third of yesterday's losses. ending higher by 2%. the weekly index still logged, fourth straight weekly losses. property stocks in japan gained 4% today after three days of selloffs. in fact, they've had quite a roller coaster ride recently. depending on the on and off reflation bets. today was a good day. sumitomo realty and development gained 4.4%.
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mitsubishi gained over 5%. japanese stakes lost steam in late trade. reportedly some of them are reducing exposure of jgbs, one of their major revenue sources after the boj tapped into that market. elsewhere the shanghai composite made a mild rebound. the hang seng in hong kong gained .4%. property stocks actually snapped. an 11-tay losing streak. heavyweight samsung electronics ended up 1% today after tanking over the past six sessions. in australia's asx 200 gained. >> thanks for that. better day in asia.
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it's a better day here in europe. snapping four days of losses. weighted to the upside. around 8-1 on the dow jones stock 600. that translates for the ftse to gain 27 points. did actually close up five points by the end of the session yesterday. we have seen bond yields a little in spain coming down a little bit again. this morning across the board lower yields. at the beginning of the week we were up near 2.3. that was causing everyone to get the jitters. a little calmer this morning. that report out late day in new york suggesting, look, even if we start tapering, nothing's going to happen with interest rates. i don't think anybody thought interest rates were going to go up. currency market, dollar index coming off four month lows. dollar/yen. above that low of 93.75 we hit
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on thursday. we were up near 103.75 not so long ago. talking of dollar/yen pimco weighed in on japan's market volatility. speaking on cnbc yesterday he gave his take on the market's disappointment with the bank of japan. >> i think the market is rightly questioning the effectiveness of the bank of japan. not the willingness, but the effectiveness. doing so for a number of reasons. first, we're yet to hear about the structural reforms. remember, central bank liquidity is a bridge. you need the destination. that's about structural reform and growth. second, japan is trying to do a lot and can only do that through capturing the -- from other countries. finally the initial conditions are the worst possible. >> all right. that was el-erian's view. joining us in nick saunders. we've been questioning the efficacy of japan's experiment, or is this more about fears
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about the fed? >> it's a combination of the two. i think the issue with japan is that the initial rally in the nikkei and the selloff in the yen has been basically led by investors, not by the fundamental underlying as you just said by the other countries and by the locals actually investing in the longer term. the short term trades made a lot of money in it. >> front run story. >> yeah. >> there are suggestions, latest pmis in japan are looking better. >> a weak yen is making it look much more competitive. it's deaf nnitly feeling effect >> after the selloff that we've seen is now an entry point or not? if you've believed -- if you've believed japan is fundamentally changing?
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>> i think it's going to be choppy. i think you'll probably see it stuck within a range between 90 and 110. you'll get fits and starts and a very twitchy, not a stable growth that they would like to see. especially if you do get the fed tapering. the combination of the two, central banks makes for a very nice, comfortable situation for the markets. but if one of them wobbles a bit, then we could have some more volatility. >> you prefer to play this, have an option on japan rather than anything else? >> options, look at japan. the absolute moves this month have been average of just under 3%. if you play it through options you can trade some of the gamut very easily and able to make money out of it. >> what about where we stand on the fed tapering? the influence that's having on sentiment? it's just as skittish. >> well, it's -- like the market taking a comfort blanket from a
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3-year-old. the market has become very comfortable and complacent with all of this unconventional stimulus. to steal a phrase from donald rumsfeld it's a no, no, no in terms of how you exit it. will it create more issues? potentially. last two times you've exited qe, we've seen big drops in the s&p. part of that is explained because of troubles in europe. given the troubles in europe aren't over yet, this could come up -- >> also concerned about too big of backup in bond yields? >> you look at it on the scale of things, it's a minor backup. it's what could happen down the road. it's, no, rates aren't going to go up any time soon as the press has talked about recently. but it's the potential of the backup in rates. so when you are basically getting free money at 1% to 2%, all of a sudden paying 3% seems very, very expensive.
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>> we sort of have been here before in the last few years. june has been i think since 2000 the worst month for u.s. stocks along with september. it was a bad month last year. we've come an awful long way. people have made money at the beginning of this year. i suppose you have to put all of this into context in terms of the recent seasonal patterns and where we've been. >> well, i think that's a very key point. and i think especially when you've got the second quarter earnings coming out. first quarter earnings, especially in europe, you saw a lot of companies miss , but rea into full year guidance. q-2 earnings if they miss again it will be difficult to -- full earnings fwi dance. in the last three years you've seen earnings revisions downward. yet the markets have always hoped for that second half rebound that's never come. i think there's a real risk of that coming again this year. >> nick, good to see you.
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equity strategies at btig. here we go. we've been watching pictures of the maiden test night of the a-350. airbus's competitor to the dreamliner. there we go. the plane has just landed. it was a very short flight. sorry. this is -- looking at a repeat of the plane taking off, may be what's going on. we talked about the fed. it will reportedly try to use next week's policy meeting to provide a soothing voice for investors. chatter about the fed pulling back on bond buying program as we've talked about pushed bonds high recently. "the wall street journal" writes investors the -- ben bernanke says he expects a considerable amount of time between ending qe-3 and a hike. he's likely to stress that point at a press conference next week. want more, go to our website, cnbc.com. leaders from eight of the
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world's most powerful country are meeting in ireland for two days of talks which start on monday. on the agenda, geopolitical issues such as the crisis in syria as well as discussions on the global economy. focus on the three ts, transparency, taxation and trade. ahead of the meeting president obama has given the go ahead for the u.s. to provide military support to the syrian rebels. that could include supplying weapons. the decision comes after the white house concluded evidence shows syrian president beshear assad used chemical weapons against opposition forces. the u.n. says nearly 97,000 people have been killed since the country's conflict began more than two years ago. meanwhile, g-8 protest groups planning a show of civil disobedience in london's canary w wharf today. they'll come together under the "they owe us" banner. also reports saying western
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diplomats say u.s. considering starting up a no fly zone in syria. possibly near the jordanian border. they're also talking about setting up a no fly zone as well. also mention this. phil lebeau will be at the paris air show next week. interviews with leading ceos. you can also follow that coverage online at parisairshow.cnbc.com. still to come, india's sold n linked government bonds for the first time in a decade. the next guest says despite the move, gold won't lose its shine for local investor. we'll find out why. i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t
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germany's reportedly seeking to delay eu membership talks with turkey in response to the government's crackdown on the recent unrest. turkey's prime minister, meanwhile, met with groups opposed to the redevelopment of a city park in istanbul. protest leaders say erdogan -- this could be a last attempt to stem the two week old demonstrations. nbc's richard engel will be with us from istanbul on the very latest from the protests at
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11:00 cet. stocks in china rebounded after being hit hard yesterday. cnbc reports there's a fear the rapid buildup is leading to ghost downs. >> reporter: you wanted to build a housing project ten times larger than new york's central park, this is what it would look like. in a chinese city authorities are spending billions to erect hundreds of thousands of new apartments. the idea, if they build it the masses will come. we're not worried about the housing bubble, this government official says. we need more homes. china is constructing new homes as part of its aggressive push to build out its cities. by 2025 china's projected to have 200 cities with over 1 million people each. compare that to the u.s., which only has nine. the move was meant to raise incomes here and create a bigger consumer class. but the concern is that there's a mismatch in investment. potentially littering china with
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uninhabited ghost towns. >> in many cases, actually, there's no -- there isn't such a huge demand here. so you'd deal with this huge infrastructure there with little use. that's going to be a huge waste of the public money. >> reporter: only ten years ago, this air wrea used to be all farmland. today it's part of the largest public housing project in china. this country is constructing 36 million new subsidized homes. even so, new city slickers like this one in beijing still can't afford to buy one. no matter where you go here, she says, housing is expensive. with so many empty apartments, concerns are rising all the building could lead to a local debt crisis. yet many argue the fears are overblown. >> officials have a lot of power in their hands. they can look at how cities are growing or how the economy is growing. they can try to build, build, build ahead to satisfy demand ahead. >> reporter: a reminder that in
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this authoritarian state, if you build it, you can force them to come. the media mogul rupert murdoch and his third wife are calling it quits. a spokesman said the marriage had become irretrievably broken. cnbc's robert frank looks at what the divorce means for murdoch's media empire. >> the divorce comes at a sensitive time for murdoch as he oversees the restructuring of news corp. into two separate companies. sources tell me they had a prenuptial agreement. it remains to be seen whether it will be amicable or turn into a court case. murdoch is worth an estimated $10 billion to $12 billion. impact on the company is likely to be minimal. wendy's two children are part of the family trust that control news corp. they do not have voting shares. their influence is limited. people close to the murdochs tell me that the couple was leading increasingly separate lives recently and one reason murdoch wanted to file now is to make sure that all material
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disclosures regarding the company and its owners were made before that big restructuring. back to you. >> meanwhile the murdochs are expected to have set up a significant prenup deals. we're asking you about the marriage of such arrangements, are you pro or con prenups? let us know. worldwide@cnbc.com. i think in english, actually, they have absolutely no basis. to my understanding. let me know. over in india, headline inflation slowed in may to the lowest reading in more than three years eluding forecasts. wholesale price index eased to 4.7% for the month continuing its four month slide. the details in mumbai. >> hi. like you mentioned, it is a 43 month low for the wbi inflation. it came -- compares to 4.8% in
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the month of april. more hearteningly, in fact, the march inflation needle has been advised lower as well, 5.6% for the month of april. you remember even core inflation has decelerated quite significantly, all the way to around 2.4% for the month of may. as opposed to around 2.6% in the previous month, indicating that, yes, maybe core inflation has decelerated. but maybe demand pressure has continued to plague the economy at this point in time. once the rbi will have a lot to -- what exactly they could do in terms of the policy rates come monday. and the wpi easing is quite significant considering it's in the comfort level of the rbi. depreciating so rapidly, quickly, and the volatility
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we've seen -- they will most likely hold. there will be a future, in fact, on the wpi going forward once it settles. not to mention there is a -- the rpi has explicitly stated in the previous statement in case the deficit does worry, they might even indicate or might even -- in the rbi policy or policy in terms of monetary easing o as of now. these are big risks playing out. maybe the wpi will just about go into the background when it comes to the rpi policy. remember cpi, basically the retail inflation, has been trending quite high because of food inflation prices. that stood at 9.3%. it was the best level since 2012. it is in complete and steep contrast to the wpi inflation data. hence maybe the wpi inflation data might not be top of mind
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for the rbi. back to you. >> thanks for that. meanwhile, inflation may have -- india's recent first sell of inflationary government bonds in a decade was fairly well received. investors snapped up all of the 177 million notes on offer. the government is hoping they will win small investors away from gold to hedge against the country's high inflation. but are the bonds a good bet? joining us with his few, steve o'hanlon. the bond was a success. even though it was a fairly small issue. what do you make of it? >> i think it's a very good idea for the indians to start introducing these. as they're also opening up the bond market to foreign investors more and more with new allocations. it means there's more options for investors, particularly ones who are interested in getting into india but concerned about the inflation story. also potentially good hedge against people getting involved with the fx situation. weaker fx create more inflation potentially.
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that's a bit of a hedge. >> down all time lows against the dollar. >> we think from a foreign investor perspective, i think it's a good thing. in terms of what the suggestion is, the retail investor, we're not so confident. we think the access to the market for the retail investor is quite limited. if you look at the big micro picture in india clearly it's about a large portion of the population not involved with the banking sector, not involved with the monetary base as we would note in the western world. this is why they rely on the likes of gold. >> what should they -- if this isn't going to work for domestic investors what should they do to try to get the reliance away from gold as inflation hits? >> absolutely. one thing we would suggest is maybe introducing things like inflation linked deposits in areas like the post office. which will attract closer relation to the retail base than you would the institutional base. we don't see a huge demand for institutional bonds or even if they called them retail bonds, given the fact the lack of access to that market. as they're trying to build up through the new id situation in
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india where they're trying to get people in the banking sector, one way to encourage them to get in the banking sector, of course, is inflation linked banking deposits or post office deposits which we think would be a great development. >> yeah, that would be. meanwhile, what happens with this inflation bond? how are they going to roll this out? what size is it going to be? >> initial idea is around $200 million to $400 million every month for the next year or so to get to 2 to $2.5 billion worth. we think obviously they're looking to, as this develops, to bring it more towards the retail market. we think there's always going to be an institutional buyer for this. a lot of the banks, for example, this will be part of their slr allocation. an interesting thing to add into the mix of their portfolio. we do think there'll be good demand. we think there's an issue a little bit about the pricing. a little bit expensive on the issue which we just got. given the fact the inflation numbers seem relatively steady right now. potentially moving a little bit higher because of the sub i sii waning. food and energy inflation might come through.
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generally thought at this stage a little bit expensive. a lot of participants like ourselves will look for a little more liquidity in the market to see if this is a buy or hold or actively trade. >> you want to see how it goes before you guys participate. >> absolutely. >> what's your own inflation outlook? bear in mind there's a lot of food and energy in there. >> absolutely. this is the big contrast between the cpi and wpi. the cpi has got twice the food and energy component than the wpi. average retail investor cpi is krit cat pl for us looking at the monetary situation we're always looking at the wpi. big disconnect there. we think over the next three months we'll see relatively steady inflation numbers. obviously as subsidies continue to come off and slight higher prices in gasoline and diesel, we could get a pickup. the vast majority of the drop in inflation is behind us. the double digits we saw in 2010. we could see as global economy develops having an impact on inflation. two factors. one would be the currency.
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potential that would have in terms of commodity prices coming into india. second one is the off loan subsidies. i think they'll be the real big drivers and unknowns over the next six to nine months. >> good to see you, steve. acpi. still to come on the program, spain's housing market is under pressure. it's weighed on the country's banks as we know. unesco says there are signs of hope from the sector and the economy. more when we come back. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪
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these are the headlines. there's a positive start for equities to the final trading day of a volatile week. europe and asia taking their cue from wall street. encouraging data outweighing concerns over when the fed might taper qe. white house approves plans to provide direct military support to syrian rebels. that could mean providing weapons. the announcement is promising to be at the top of the agenda when g-8 leaders meet in northern ireland. insisting iran doesn't give a damn about u.s. concerns over the fairness of the election
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process. we'll be live in tehran. airbus's rival to the dreamliner takes off for its first test flight. this ahead of the paris air show. meanwhile the open equities today have shrugged off four days of losses. only three days for the ftse 100 to try and post gains this morning. up half a percent. two-thirds for the x etra dax. cac off slightly. bond yields have come down today pretty much across the board. ten year yields, 2.09%. u.s. treasury yields 2.13. pretty much touching 2.3% in the middle of the week. on the currency markets dollar/yen has been fairly skittish. just below 95 at the moment. 93.75 was the trough we hit briefly on thursday. euro/dollar still above 1.33.
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standard and poors has affirmed spain's long-term credit rating at triple b minus with a negative outlook citing potential for further downgrade if the prime minister fails to implement key reforms. ratings agencies warn spains gdp will contract by 1.5% this year. this comes as spanish housing market remains under pressure. home prices fell in the first quarter at the fastest pace since the start of the crisis. according to fresh data the property woes continue to pose trouble for spain's already weak lenders. is there any hope for a recovery. pierre lapoint is head of global strategy at research pavilion global markets. he's on the phone from montreal. pierre, thanks so much, indeed, for joining us. you are starting to find reasons for optimism in spain. where? >> yeah. well, you just mentioned the official -- the national statistic institute numbers for
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prices. down 6.1%. it was another indicator, express indicator that was published a few days ago from the ministry in spain which depicted a much brighter picture. they were seeing home prices down only .8%. so which one is right? we'll know later on. but basically what we are looking in spanish housing is for bottom over the next few quarter. that's going to be very, very important for spanish -- for the spanish economy. because right now spanish internal demand is really crippled. if prices start to bottom that's really going to help consumers over there. they will have to deleverage much, much less. this will also bring the attention of the -- within investors of institutional equity investors.
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this is something we saw in the u.s. these long term or longer term investors, i should say, got involved a bit before we actually hit the bottom in home prices. and we're starting to see evidence of that on the coast. home prices on the coast are starting to recover a bit. this is where foreigners are most likely to be involved. so down the road we wouldn't be surprised to see home prices reach bottom over the next few quarters. we call that a secondary -- improvement. yes, it is still declining. the rate of decline is becoming less intense. >> okay. which i suppose is a necessary thing before we get better. what about deleveraging? we seem to still have somewhere to go on that. >> yep. it's been a slow process. much slower than what we saw in the u.s. or what we saw in ireland. but we're getting there. so slowly but surely, we are
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seeing the spanish consumers delever. that's going to -- that's an important factor. honestly an improvement in home prices would help a lot on that front. >> look, we -- you know, we've talked about whether the ecb is going to do anything here to help, you know, with lending to smes. it appears at the moment they're not going to go down that path. so how disappointing would that be? >> yeah. it's very disappointing. the fact that they postpone ed they officially postponed that plan. but a small and medium enterprise funding scheme or even something similar to what we saw in the uk, funding for lending, would be extremely positive. the problem we're at right now is that corporate loan rates are extremely high in spain. they have not gone down, contrary to other european
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countries. they're still around 5.6% as we speak. we need something else from the ecb at this point. on the other end, though, the spanish economy is improving a lot. we've seen the spanish pmi bounce back. they're still in contraction territory at 48.1. but we have to remember that a few months ago at the end of 2012 they were below 40. the other thing we really like about spain is that the internal competitiveness has improved significantly. spain has implemented a number of labor reforms over the past few months. and the most important one was that they reduced the severance payment from 42 months to 22 months. as a result it was easier to lay off employees. labor costs in spain have decreased by 10%. that compares to an increase of about 4% or 5% or 6% in france,
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italy and germany. basically, spain is becoming more competitive. and it shows very good results in terms of trade-offs. so imports in spain have decreased because the spanish economy is still struggling. but exports are still in an up trend. that's very positive for us. >> all right. pierre, thanks very much, indeed, for that. good to speak to you in montreal. head of global strategy at research pavilion global markets. just had some data talking about spain. spanish banks borrowing 259.3 billion euros from the ecb in may. that is a slight reduction from 265 in april. this is data just out from the bank of spain. it does mark the ninth month of consecutive falls. which is the point pierre was making. data is going to right way, although it's taking a bit of a while. we've also had some construction data out of the uk. nonseasonally adjusted construction output minus 6.5%
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on the month. and it was down 1.1% on the year. the latest construction pmi suggests for may things actually are starting to turn around and get slightly better. some of the housing plans may be helping that out. energy and politics. western diplomatic sources have told reuters the u.s. is considering setting up a no-fly zone in syria. this as president obama gives the go ahead for the u.s. to provide military support to the syrian rebels. the plan could include supplying weapons. the decision comes after the white house concluded evidence shows syrian president bashar assad used chemical weapons against opposition forces. the u.n. says nearly 93,000 people have been killed since the country's conflict began more than two years ago. germany's reportedly seeking to delay eu membership talks with turkey in response to the government's crackdown on the recent unrest. at the same time, the prime
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minister from turkey met with groups opposed to the redevelopment of a city park in istanbul. some say it could be a last attempt to stem the two week old demonstrations. coming up, nbc's richard engel will join us from instan bull for the very latest on those protests at 11:00 cet. japan's cabinet has endorsed a long term growth strategy. the story from tokyo. >> hi, russ. the final economics arrow is mainly aimed at boosting private sector investment and rebuilding businesses. but issues such as corporate tax cuts were left out in proposals. so it's widely expected to not break new ground in reviving the economy. the japanese market reflected -- reflected investors' doubt and disappointment, which plunged to
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bearish territory after prime minister abe unveiled the plans last week. meanwhile, the bank of japan released minutes today from their board meeting in may. it showed that the members of the board think the japanese economy is finally starting to pick up. but some members admit it could be difficult to achieve the 2% inflation target in two years. one member also said that the central bank should set a two-year limit to its monetary easing to avoid financial imbalances. since the economy can't recover by monetary measures alone, abe promised to deliver a second batch of reforms after an upper house election in july to regain the momentum. back to you, russ. >> thanks for that sachiko. have a good weekend. japan stunned the markets back in april with unprecedented monetary easing. have since failed to offer any comfort. so is japan's central bank to blame for the market's violent swings? go on to cnbc.com. find out what investors are saying. still to come, the world's
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second biggest theme park operat operat operator merlin entertainment is preparing to list in london. ceo nick varney. that exclusive interview will air right after this. we went out and asked people a simple question: how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age. ♪ the question is how do you make sure you have the money you need to enjoy all of these years. ♪
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i was embarrassed to have anyone see my shingles. the rash was on my right hip, going all the way down my leg.
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it was very, very painful situation. i'm very athletic and i swim in the cold water in the ocean. shingles forced me out of the water. the pain level was so high, it was like fire. and i was thinking like, i wish i had that cold water i could go in it. the doctor asked me "did you have chickenpox when you were a child?" i'm very healthy and i do all the best things to keep it that way. all of a sudden i got shingles. it was so hard to accept that pain, it became unbearable.
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iranian presidential elections take place today. with six candidates remaining the winner will replace mahmoud ahmadinejad who's constitutionally barred from seeking re-election. favorites to win include jalili and the tehran mayor. nbc joins us now from tehran with this report. ali? >> reporter: good morning. that's right. the three front-runners in this race are as you said, jalili, who's the chief nuclear negotiator. the tehran mayor. and the only thing that's close to a reformist candidate, the centrist, rohani. who's hoping to tap into the youth vote here. there are 50 million eligible voters in iran. a third of them are under the age of 30. that's who mr. rohani wants to tap into. he's hoping these people will
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come out in their drives and if they do it could change his fortunes. if they don't, this looks like it'll be a hands down victory for the hard liners. at this stage it's still very early to tell. the ballot boxes were somewhat crowded in some parts of town. other places not so much. here in tehran we're not getting a very good idea of what's going on in the cities. also in a country with no accurate or independent opinion polls, it's very difficult to tell who's going to win this race. but we've been told by the early hours of saturday morning, the results may be released. if it's too close to call between some of these candidates, the two people with the highest number of votes will go off into a runoff election sometime next week. possibly next friday. but all will be told by the early hours of saturday. back to you. >> all right, ali, thanks very much. global banks have been setting their sights on emerging markets. allured by rapid growth -- there
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are still significant risks to expanding in the developing word. a new report from ernst and young. before we sort of get into that report, i just wonder, first of all, we've seen such a big outflow of funds from emerging markets over the last few weeks. concerns rise about the cost of funding for the u.s. going up. treasury yields going up. skittishness on local bonds as well. is that having -- going to have an impact on banks right now? or will they wait? >> i think, you know, the markets tend to route very quickly to these events. the bapnks, certainly global banks that are invested in these markets are looking at things, are going to take a more measured view. particularly as a lot of these issues are actually more to do with what's happening in the u.s. rather than what's happening in individual economies. now, there are some markets that have suffered more than others.
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you know, we saw yesterday the indonesians put up their benchmark rate. because there is concern about the deficit. i think there's a mix. they will tend to take a broader view rather than react to sort of short-term events. >> what's interesting -- least bullish about their economies. >> they are. we did a sort of -- we cover ten markets in the report. three in latin america, three in asia pacific, four in euro, middle east and africa. the latin american banks were the least bullish about the economy. although interestingly, all of them were still fairly bullish about their own bank performance. so i think -- >> you would expect them to, though, wouldn't you? no one's ever going to say i think we're going to have a really rubbish time. or do some say that? >> we actually do a european version of this. and they are far less bullish as
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you'd expect. >> okay. yeah. >> i think, you know, in latin america, you know, you've got productivity concerns in the economy. you've got industrial unrest in columbia. so things like that, you know, are continuing to sort of drive down sort of the positive sentiment in a couple of those markets. >> yeah. how is mobile banking taking off in, you know, certain parts -- in emerging market parts of the world? >> it is. it is a huge opportunity for two reasons. firstly, it's a way of reaching the unbanked often in remote and rural areas. you need to bear in mind that the adoption of mobile phones and smartphones is actually often far ahead of banking. so they really -- it's a great opportunity to access sort of people who don't have a branch nearby. but the other thing is, you know, as these markets become far more competitive, there's a real opportunity to move people away from branch sort of
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interaction into mobile for the basic products and services. and thereby make the whole banking system much more efficient. >> you talked about demand for credit for businesses going to outstrip supply. how are banks going to meet that demand? >> as they tap into sort of the currently unbanked population, or the underbanked population, some of that -- some of those deposits will help to fill the gap. i think the other issue is then you start to look at, you know, in terms of one aspect, is a high net worth individual. a lot of that money tends to flow offshore. as the economies become more stable, and as the banking system becomes more sophisticated and more stable, more of the wealth will stay on shore. you'll start to see development of pension funds, insurance companies. so you start to develop a much stronger domestic capital market. at the moment, a lot of the banks are having to go overseas on the wholesale markets which is clearly more expensive. as we've seen potentially
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volatile. >> clearly there's -- the domestic banking sect rs in these regions. how much are the big global banks also thinking there is going to be an opportunity and how much are they going to try and fwet some market share? >> at a headline level, they absolutely are. it tends to be kind of -- as well as looking at banks at a regional level we broke them down into frontier markets. vietnam. transitional economies in the middle. then established like turkey, south africa, malaysia. what you tend to see is you've got banks going into all of those. but in different ways. so in vietnam, for example, they're going in. they see it as a really long term bank. whereas they're much more invested into turkey, malaysia, where there is a more immediate opportunity on the capital markets and investment banking side. >> steven, good to see you. the hang seng is down 7% year to date. that's been weighing on ipo sentiment in hong kong.
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properties is postponed as a result an offering. the second postponement in the territory in the last week. it hopefully won't stop the world's second biggest theme park company, merlin entertainment preparing to go public. it had intended to float in 2010. you are uk editor has the details. >> it wasn't long ago that getting to london -- was a bit like getting into a tank with some of these guys. but merlin, owner of the london eye, mad dam trousseaus and this place is looking to take the plunge. that would make it the biggest uk business floating since before the financial crisis. let's hope for their sake that it's going to be safer ipo waters. >> we looked to floating before. there's no question.
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we got a very positive response to merlin at the time we went to see somebody. but at that point there was still a sort of shadow of suspicion stalking the markets. a little bit of mutual distrust between private equity and the big institutions. i think one of the big changes now is actually i think that's all dissipated and gone away. institutions are recognizing that there are some really good companies out there that have been brought through by private equity that will make great ipo candidates. >> what are the lessons you learned last time? >> we've been going out talking to potential institution shareholders from the middle of 2009. we've been acting like a plc. we've been doing analyst presentations, producing a company report, making sure people knew what the merlin story was. because it's actually relatively unique in the market. as a consequence, we continue to do that even after, you know, we decided not to float in 2010. >> the divide between private equity backed businesses and the distrust that fund managers
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felt, was that -- did you feel a victim of that? was that personality driven? >> i think one of the problems back in sort of the early part of 2010, the markets were already volatile. they were already shaky. people didn't need too many excuses to sort of look with suspicion on potential ipos. >> the complaint, i guess, is that private equity backed businesses are too overlevered. they don't invest enough in the company. and really an ipo is just an opportunity for the sponsor to take money off the table. do you think that's true? where does merlin differ in that? >> merlin's been -- 14 years. in that period of time we've gone from a little business based in the uk with 25 million pounds turnover to a business with 1.1 billion pounds turnover operating in 23 countries and four continents. throughout that time, through all those private equity owners, never once have i been put under any pressure to not invest in the business, not invest in
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quality. in fact, quite the opposite. >> how have you won the argument with the institutional community? who as you said are quite -- quite nervous about private equity companies? >> people are really interested in strong propositions where you can see a clear brand, a clear market positioning. clear opportunity. i think people are interested in growth. i think people are particularly interested in businesses that have got a good opportunity to expand in emerging markets like asia. i think people value brands. and they value really strong cash flow. >> why do you think it would suit merlin to be a public company? >> because as a business, you know, we have been there 14 years in private equity. it's been great. but there are a lot of opportunities and projects out there that need longer term planning. that's the one potential drawback with private equity in that you're always looking at three to five-year horizons. i want to know we've got a long term stable ownership structure
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now to take the company through its next stage of growth. >> this year, uk companies have raised 2.3 billion pounds from the london stock exchange. that's 13 more than all of last year put together. thanks to equity markets, those businesses have actually traded up. leaving a good taste for some of those fund managers out there. today, merlin are going to appoint four or five hands to help them with this process. the true test for whether the uk ipo market really regained power is going to be whether merlin can make a real splash. >> don't see that every day. european equity markets.
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yields are lower today on gilts and treasuries as well. dollar/yen trading around the 95 mark. did get down to below 94 on thursday. remember, we were up at 103.70 a few weeks ago. euro/dollar still off highs. dollar index four month lows. still to come, despite getting a final warning from president erdogan, turkish protesters continue to demonstrate on taksim square. we'll be in istanbul right after this. i want to make things more secure.
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a positive start to the final trading day of a volatile week. europe and asia taking the cue from wall street. encouraging data outweighing concerns of the fed tapering the qe program. don't overact. the fed will push that message at the meeting next week insisting a pullback won't lead to an immediate rate hike. western diplomats say the white house is considering a no-fly stone over syria as washington approving plans to provide direct military support to syrian rebels.
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ayatollah khomeini calls on iranians to come out in force and vote in the presidential election insisting tehran does not give a damn of u.s. concerns over the fairness of the election process. airbus's a-350 extra wide body jet takes off on the maiden test flight marking a major milestone in the development of the plane that will directly take on boeing's dreamliner. all right. european equities have rebounded along with asian equities. germany is reportedly seeking to delay eu membership talks with turkey in response to the government's crackdown on the recent unrest. ered erdogan's spokesperson said
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the project would be frozen until they caught rules on its fate. for the latest on the protests and those meetings, nbc's richard engel now joins us from istanbul. richard, what's happening today? >> reporter: right now the government is putting the decision back out to the protesters. there was a meeting yesterday between erdogan, the prime minister, and representatives of the protesters. in that meeting erdogan and other officials said that they would put any decision about developing the park, which was, of course, the reason behind this protest movement over two weeks ago, to a court ruling. and then said if the court did rule in favor, saying that the development project could go ahead, that they would take yet another step and allow the people in this district around the park to vote in a kind of referendum to see if they approve the project or not. now it is up to representatives of the park, the protesters
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themselves, to answer this -- this proposal by the government. they are supposed to be meeting here in taksim square today and tonight. amazingly, despite the torrential rain that we've been seeing for the last several hours, there are still protesters here. it's unclear whether they will accept these demands, whether they will reject them. and if they reject them, then it is still possible that the government could go in by force to clear out this area. i must say, most of taksim square is now up and running as normal. there is foot traffic. there is vehicle traffic. it is only the fwreen area, the park, that is still a protest camp. >> richard, thanks for much for that. richard engel with the latest in istanbul. leaders from eight of the world's most powerful countries will meet in northern ireland for two days of talks which start monday. on the agenda geopolitical issues such as the crisis in syria as well as discussions on the global economy that will focus on the three ts.
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transparency, taxation and trade. western diplomatic sources have also told reuters the u.s. is considering setting up a no-fly zone in syria, possibly near the jordanian border. this as president obama gives the go ahead for the u.s. to provide military support to the the syrian rebels. the plan could include supplying weapons. the decision comes after white house concluded evidence shows that the syrian president, bashar assad, used chemical weapons against opposition forces. the u.n. says nearly 93,000 people have been killed since the country's conflict began more than two years ago. geoprotest groups are planning a show of civil disobedience at london's canary wharf today. organizers say various groups from environmentalists to anti-austerity campaigners will come together under the "the owe us" banner. all right. that's the latest on global news. let's bring you up to date with global markets. sichuan kicks off for us in
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singapore. better day today if you were long in the markets. >> a bit of a reprieve here in asia. markets bounced back up thanks to improvements in the u.s. picture. the nikkei 225 had the most fwround to make up after plunging more than 6% yesterday. it rebounded 2% te spite a stronger yen versus dollar as investors tried to buy back in on the dips. property stocks led the way. gains were more muted in greater china. mainland banks struggled on cash crunch fears with the finance ministry struggling to sell nine month notes. chaico fell 7.5% to a 4 1/2 year low. it will be replaced on the hang seng after today. elsewhere, australia enjoyed its biggest daily gain for the esx 200 in 17 months as investors finally shrugged off fears the fed would end stimulus prematurely. that's your asian market minute. >> that was the wrap from asia. let's bring you up to speed with
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how that's translating into the futures right now. currently the dow is some 40 points above fair value. nasdaq at the moment is some 5 1/2 points above fair value. s&p at the moment is around four points above fair value after rebounding yesterday up 1 p.5%. that means the cnbc global 300 at the moment is about a third of a percent higher. ftse actually in the end was up yesterday only by five points. although it's been four down for european stocks generally. up .5% at the moment. ibex up .5%. lower bond yields in italy and spain. ftse mib underperforming, fairly flat. speaking on cnbc, a take on the market's disappointment with the bank of japan. >> i think the market is rightly questioning the effectiveness of the bank of japan. not the willingness, but the
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effectiveness. doing so for a number of reasons. first, we're yet to hear about the structural reforms. remember, central bank liquidity is a bridge. you need the destination. that's about structural reform and growth. second, japan is trying to do a lot and can only do that through capturing the -- from other countries. finally the initial conditions are the worst possible. >> this comes as the fed will reportedly try to use next week's policy meeting to provide a soothing voice for investors. chatter about the fed pulling back on the bond buying program has pushed bond yields higher. they are lower today. "wall street journal" writes investors shouldn't second guess the fed's commitment to keeping rates low. bernanke said he expects a considerable amount of time to pass between ending qe-3 and a rate hike. bernanke's likely to stress that point at his press conference next week. joining us with his views, chief investment officer, head of investments at cignia.
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why are we getting our niknicke in such a twist? >> i think this is just simil symptomatic of the positions people have going into the late may discussion of the fed. i think the fed minutes themselves were stronger than the comments that bernanke made. i think the market was a little jitterish as to just whether there was going to be any june tightening. i think june tightening or tapering discussion has been really firmly kicked into touch. data is much more supportive of the fed being stimulative for quite some time into the end of the year and possibly into next year. actually, you know, what we see is the yen strength we've seen that everybody's getting into a -- about is a good thing because it means the japan experiment has not resulted in some kind of real flight to capital or currency te
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appreciation for japan that cannot be controlled. the stimlugs they've announced is is here to stay. >> that's a strange thing. we went from where we were at 93 yesterday, kind of where we were when they started. drive it from 93 to 103. near 104. we're back where we were at the beginning. >> isn't that a good thing? >> i don't know. >> yes, it is. >> that sort of volatility, that's not a good thing, is it? >> it's a good thing for us looking forward over the next three to six months. a yen is equal to dollar. fed is doing 85 billion and the bank of swra pan needs to do 75 billion. what the fed is taking away the bank of japan is stepping in. of course, that export of capital was not going to happen at 105 or 110 from japanese institutions. but at 93, 94, 95, and with markets a little bit lower and an allocation to fund these pension funds in japan, it looks as though the global -- the global system will enjoy the benefits of japan liquidity. and they will continue to enjoy the benefits of fed liquidity
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for the remaining months of this year. >> as we go through this next period, now, this third quarter, how volatile do you think it's going to be? we're not going to really get any further insight into -- into, you know, the fed is still going to taper at some point. that is going to keep going. it's going to take us a while to work out what is happening in japan. >> i think they've understood, the fed has, what impact words can have. they've also understood from the market's reaction that the market and growth right now is not ready to handle tapering. if it were, we wouldn't be so concerned about what is only 40 to 50 basis points move up in longer term yields in the 10 year and 30 year. the fed will rein back that talk. we expect volatility to die down. maximum increase in volatility has happened. summer should be relatively sedate. we're looking for the base we established last week to be strengthened in the coming weeks. markets seem set to test their
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highs for the year. >> we're still up at the moment. just on 14%, 15% for the year on u.s. equitieequities. why not just take that and call it quits? >> you could. but if you look at europe, look at emerging markets, and i think that's where you've got some of the ability to outperform the u.s., even the uk only up 4% to 5% for the year -- >> you think -- because there's been reason money's been flowing into the united states. they've got growth. you think that that outperformance is is coming to an end? >> as growth expectations pick up, which is what we expect going into the year end, you would expect the cyclical markets to do better than the most defensive market, which is the u.s. >> expectations have picked up in the united states. they haven't picked up in europe. >> growth expectations going into the year end for europe look better. china, which is stabilizing, will also look better. the u.s. growth which we expect
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to be growing at 3% or thereabouts for the q-4 of this year is going to pick up european growth automatically. so the cyclical markets will -- >> how important is this -- it's always important. this earning season to me into this is going to be fairly key, isn't it? do companies in the first quarter were saying, weren't meeting expectations but were still saying the full year is going to be okay. if we don't meet expectations second quarter, there's going to start knocking full year forecasts. >> yes, we haven't had the top line growth. but some of the comments that we're getting from well connected ceos are telling us that actually it's not quite as bad as the top line picture may seem. confidence will come back. the gridlock that we've had from politicians in the u.s. most specifically, companies are saying, look, we just have to get on with things. i think both sides are meeting in the middle. therefore that confidence being restored will mean the corporate
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cash with recovering consumer confidence, which likely we'll see later on today, will show that they can spend. >> good to see you. have a good weekend. thank you. batra from signia wealth. a reminder what's on the agenda in the united states. may ppi. 8:30 eastern. producer prices forecast to rise .1% with or without including food and energy. 8:30 the first quarter current account figures. 9:15 it's may industrial production. that's expected up 2%. before 10:00, the first report on june consumer sentiment. analysts looking for a reading of 84.3, down slightly from may. keep your eyes on smithfield foods. it's being bought by china's shanghu international. reporting earnings before the open zbrnchts we'll take a short break. still to come, media mogul rupert murdoch announced he and his third wife are parting ways.
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what will this one yield? we'll have more after the break. i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t have the security you need to get you there. call us. we can show you how at&t solutions can help you do what you do... even better. ♪ how old is the oldest person you've known? we gave people a sticker and had them show us. we learned a lot of us have known someone who's lived well into their 90s. and that's a great thing. but even though we're living longer, one thing that hasn't changed: the official retirement age. ♪ the question is how do you make sure you have the money you need
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if you've just joined us this morning, reminder of the headlines. asia and european headlines trade high taking a cue from wall street. after a volatile week the fed is said to be planning to soothe
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investors' fears at its next policy meeting. western diplomats also reportedly reveal the white house is considering a no-fly zone over syria. the airbus a-350 meanwhile successfully took off for its maiden flight from toulouse earlier this morning. employees and spectators cheered the flight which comes ahead of the paris air show next week. the new fuel efficient jet is designed to compete with boeing's dreamliner. airbus hopes to begin delivering its first jet by the end of next year. news corp. cfo david deveau will retire following the company's planned split later this month. deveau is credited with overseeing several transactions including the acquisition of dow jones in 2007. news corp. shares which we don't have at the moment -- we did see pictures there of media mogul
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rupert murdoch, news corp. chairman, with his third wife wendi deng. after 14 years together, they are calling it quits. a spokesman said the marriage had become irretrievably broken. cnbc's robert frank looks at what the divorce means for murdoch's media empire. >> the divorce comes at a sensitive time for murdoch as he oversees the restructuring of news corp. into two separate companies. people close to the murdochs tell me they had a prenuptial agreement but it remains to be seen whether this will be an amicable twors or turn into a court case. murdoch is worth an estimated $10 billion to $12 billion. the impact on the company, however, is likely to be minimal. wendi's two children are part of the family trust that control news corp. but they do not have voting shares so their influence is limited. people close to the murdochs tell me the couple was leading increasingly separate lives recently and one reason murdoch wanted to file now is to make sure all material disclosures regarding the company and its owners were made before that big restructuring. back to you.
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>> murdoch's prenuptial agreement with wendi deng remains a secret. are you pro or con prenups? i don't know tweeted i hate to see marriages split. for the wealthy a prenup helps. another view tweeted, i'm against prenuptial agreements. it seems like the person who wanted the agreement has one foot out of the door. rick tweeted i don't think i'd ask someone to sign one, but i'm not against them. keep them coming. e-mails worldwide at cnbc.com. we'll take a short break. still to come, according to a new report, u.s. hotels are the most luxurious in the world. but they shouldn't get too comfortable. which countries are looking for an upgrade? we'll find out after this. ♪
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supporting some of the biggest ideas in modern history. so why should our history matter to you? because for more than two centuries, we've been helping ideas move from ambition to achievement. ♪ and the next great idea could be yours. ♪ all right. as far as u.s. marketings are concerned today, we are calm ec to open a little higher after gains yesterday. the s&p 500 just implied fairly flat. nasdaq called up one. meanwhile the u.s. is checking in as home of the luxury hotel. 75% of luxury hotel chains are based state side. u.s. consumers report the
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highest interest in the sector according to the digital luxury group world luxury index. good news is, luxury -- interest in luxury hotels grew at high rates in russia, india and china. ceo of digital luxury group david sedeke joins us. what's the key trend this report has given you about this -- the luxury hotel sector? >> hi. thank you for having me. so, first of all, when we decided to make this study, we wanted to provide an international perspective on the state of the travel market. by working closely with the team and the chair of luxury, the team at digital luxury group find out that actually the market is stable. if you look at the big picture right now, the travel industry is is stable. but there are tre mentous
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opportunities for growth especially within the emerging markets. >> yeah. what role are chinese customers playing in the growth of, you know, luxury hotels? >> i mean, the china part is like a major part of the equation. you might have seen that it shall -- i think two months ago air china just announced they ordered 100 airbus a-320s. i think worth $8 billion. it means they are increasing capacity. they will fly more and more people abroad. so we can expect, like, a tremendous growth for the hospitality industry both within china and also internationally. >> who are the international hotel chains that are doing best within china? >> there are a few doing a terrific job in china. i think if you have to pick one, we should have a look at
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sheraton. i think they were really smart in one end keeping a very consistent brand. while also tailoring the value of their hotel to the local taste of chinese. for example, welcoming them with very good chinese breakfast and chinese service and so on. >> u.s. still dominates the luxury hotel industry. but we've got growing consumer -- what's interesting here, the fastest growing luxury hospitality consumers, russians, chinese a little bit, then the britts. that's an interesting mix. >> yeah. it's surprising. if you look at the the u.s. right now, it remains the biggest market. what is interesting is that we publish the world luxury index across different segment of the luxury industry. the jewelry, watches, cars, so on. if you look at all those segments, the one mostly dominated by the american right now is hospitality business where you have a lot of the
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major hospitality chain being american hotels. when it comes to the countries where traveler are expressing the fwroei ingrowing interest f ho hotels, it's true it's surprising to see the brits. >> david sadigh, ceo of digital luxury group. they're going to be out on the course early today to try to finish up the u.s. open. phil mickelson grabbed the early lead. tiger woods had a little bit of trouble on the fairways and greens. he's two over three ten holes. the masters champ adam scott paired with woods and roy mcilroy. three under through 11. the leader, this man, luke donald at 4 under.
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this is the putt that took him to 4 under, i believe. shot of the day, good or bad, depending on how you look at it, lee westwood on the 6. he completely missed the green, hit his ball into the stands. caught on the fly by a fan. what a catch. lee at no tididn't look so happ that, though. look at that. bang. that's what happens if you're a baseball fan, i guess. still to come on the show, we'll hear from one high yield investor who fell from grace as a former goldman partner at the height of the financial crisis. he's planning a comeback at phoenix star capital.
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you're watching "worldwide exchange." i'm russ westgate. recap of the headlines. positive start to the final trading tay of a volatile week for equities. europe and asia taking their cue from wall street. encouraging data outweighing concerns over when the fed will taper qe. don't overreact. the fed will reportedly push that message at its meeting this week insisting a pullback on qe-3 wouldn't lead to an immediate rate hike. western diplomats say the white house is considering a no-fly zone over syria. this as washington approving plans to provide direct military support to syrian rebels.
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and ayatollah khomeini calls on iranians to come out in force and vote in the presidential election insisting tehran does not give a damn about u.s. concerns over the fairness of the election process. airbus's a-350 extra wide body jet has taken off on its maiden test flight. it marks a major milestone in the development of the plane. it's due to directly take on boeing's dreamliner. all right. yesterday u.s. stocks had rebounded. s&p and dow -- right now called slightly firmer at the opening. two points above fair value for the nasdaq. the dow at the moment is some 31 points above fair value. european stocks, meanwhile, have tried to trend a little bit
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higher. ftse 300 up a third of 1%. up just five points yesterday. a bit of an outperformer. right now up another 26 points. .4% higher. the cac up around a third. bond yields in europe have also gone down as well today. at the end of a volatile week, what are investors supposed to do? a recap of some of the thoughts we've already had from our guests on cnbc today. >> however, some of these positions may -- overshoot. i wouldn't -- if this correction continues, pretty soon we may be looking for some right opportunity.
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>> considering the capital reserve issues, i know i'm willing to hold despite what may come in a weekly volatility cycle. i have my limits. i have what i'm interested in. i think european banks, core economies. there's some good value over there. >> so the market has already taken a bearish position for copper. again, to use the word the delta, the change is that the market becomes less negative, not more. we're at a very large, significant short position in the future markets for copper. it's beginning to turn. it's beginning to turn the last couple of weeks. >> meanwhile the fed will probably try to use next week's policy meeting to provide a soothing voice to investors. chatter about the fed pulling back on its bond buying program has pushed bond yields higher.
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"the wall street journal" writes investors shouldn't try and second guess the fed's commitment to keeping rates low. fears of fed tapering rocked u.s. -- sovereign and corporate bonds. barclays high yield index in the green over the last seven days capping a week that saw major, major swings. joining us in studio, founding partner of phoenix star capital. >> good morning. >> good morning. welcome. on the comeback. let's get your thoughts, first of all. we saw a big spike up in u.s. treasury yields up to the 10 year up to 2.3%. that has a big indication for the entire high yield bond space. is there an overreaction going on at the moment to what the fed may or may not do? >> i don't think in the high yield space it's reacting that much. i think that the -- what you see there is an interaction between
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the perceived demand for bank loans, will banks lend. you've seen over the last six weeks a mayor shift between clos, bank loans, and c -- excuse me. cbos to high yield bond market. i think that is as much cause of the volatility and high yield as the spread over treasuries. obviously if the 10 year goes up to 3.5% it's a different story. where it is now i think the other factors that i mentioned are more important. >> yeah. obviously the key thing is, is when treasury yields are so low, every man and his dog has gone looking for yield, right, wherever it is. which is obviously clearly supported that market. how would you describe the fundamentals now as opposed to sort of the hot money going into the sector. >> i think the fundamentals tied to what i said a minute ago, the -- there is obviously we've been in a substantial recovery
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over the last five years. as companies are able to access capital and begin to grow back. and portfolio managers of high yield bonds who saw their positions drop as much as 30% in six months in 2008 basically have gotten most of that back. so the returns in the high yield marketplace over the last two or three years are highly unlikely to be sustained. having said that, the longer term investor, again, unless treasuries go to 3.5% or 4%, you've promised your investors if you're a fiduciary fund manager you'll do 7% or 8% over time. you've got to take more risk to do that today than has been true in a long time. will the demand continue for high yield? i think so. >> the bank of england said the biggest risk right now for the global economy, global markets,
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is what he's called this sovereign bond bubble. you -- you had a fallout, right, from the financial rye scrisis? we'll talk about that in a second. do you agree with that? you know, i don't know where you are on the investment scale. actually, we have an artificially inflated sovereign bond market. trying to let that down is an enormous risk. >> i don't know a lot about the sovereign market. i'm not in it. >> i appreciate that. >> but i think that it -- clearly the corrections of whatever we're talking about in the bond market will have a ripple effect into the high yield market. so if we're going to have a deleveraging of sorts of the sovereigns, yeah, it'll affect us. >> your new company here, phoenix star capital, which you're now setting up, i mean,
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how -- how -- when the financial crisis came, your business had to shut down. you lost your money. you're now on the comeback from that. why is it so important for you to get back? >> i think that this is a very good time to enter -- to re-enter a space i've been working in for 40 years. i think i know it very, very well. i think the opportunities are going to be numerous but shorter duration than they used to be. i think there's going to continue to be a linkage between the restructuring business and the high yield business. i think that clos as a broader group have dramatically increased. as you probably know, the volume last year was substantially higher than the peak in 2006. as the regulatory environment changes in america for banks and how they lend and what -- how
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they can participate in clos, there will be a lot of opportunities for boutiques like us to do that. >> how does your experience -- how is that guiding you with this new venture. >> well, i think that my previous business suffered like a lot of other people with a very rapid lockup of credit worldwide. and when you're in the credit business, which we were, a lockup like that is very difficult to withstand. i thought before that when thinking about the rate of growth we could have, that the odds of what happened were less than 1%. i still think at that point the odds were less than 1%. but sometimes 1% happens. and that happened to us. and now you ask me what i would do differently. i think the only thing i would really do -- that i'm going to do differently in phoenix star is i probably will not try to grow as fast as i did before.
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and i will be more careful of trying to protect against the perfect storm like we had. yeah, sure, i mean, people learn from the past. it's a somewhat painful and expensive way to learn. >> good to talk to you, fred. thanks for coming in. next time you're over, come back. we'll see how you're getting on. fred, stay there for a sec. we'll let you go in a second. you're keen to get out. >> no, i'm not. >> it was a painful experience. >> no, not at all. >> good to see you, fred. thank you. senator dianne feinstein, the chair of the senate intelligence committee says congress will consider legislation to limit the access of government contractors to certain classified information. this comes in the wake of the leaks by the former nsa contractor edward snowden about the u.s. government's top secret surveillance programs. feinstein says nsa director keith alexander's promise to
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make public on monday a list of terrorist efforts that have been thwarted by those programs. coming up, the battle for control of wireless service provider clear wire heats up as an advisory firm changes its mind. will sprint or dish emerge victorious? details on that. plus, the world's second biggest theme park operator merlin entertainment is is preparing to list in london. catching up with the company's ceo. "worldwide exchange" continues in a moment. i want to make things more secure. [ whirring ] [ dog barks ] i want to treat more dogs. ♪ our business needs more cases. [ male announcer ] where do you want to take your business? i need help selling art. [ male announcer ] from broadband to web hosting to mobile apps, small business solutions from at&t have the security you need to get you there. call us. we can show you how at&t solutions can help you do what you do... even better.
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now, you might have heard in london of mad dad trousseau and the london eye. the company that helps to run those ventures preparing to go public. merlin entertainment hopes to list in london by 2014. ahead of the ipo, our british editor caught up with the group's ceo in an exclusive interview. she asked him about how reliant they are on u.s. investors. >> i personally think is this i one of the most exciting things that's happened. if i go back to 2010 it was quite a parochial picture. you thought if i'm going to list in the uk, i've got to get uk investor. if i'm going to list in america it's american investors.
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actually, you know, i'm not the expert on this. but what i'm reliably told and what i can see with my own eyes is actually the biggest funds these days are the big global investors. these are people that basically are searching the planet for good investment opportunities. good companies that show all those characteristics i've said of brands and growth and cash flow and good returns. and good management. and they basically don't care where they're listed. >> all right. those comments out. more of that interview online. a recap of the headlines. asia and europe trading higher. equities taking a cue from wall street's rebound in the last trading day of the week. after this volatile week, the fed is said to be planning to soothe investor fears at next week's policy meeting. and western at this particular times have reportedly revealed the white house is considering a no-fly zone over syria. meanwhile, there's a new twist
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today in the ever changing take over battle for clearwire, the u.s. based wireless services provider. jackie deangelis has got the latest for us from hq in the states. morning, jackie. >> good morning, russ. that's right. iss doing an about face. the influential proxy advisory firm is reversing course, now recommending that clearwire shareholders vote against a takeover by sprint. this coming after clearwire's board backed a counteroffer by dish network late wednesday. sprint currently owns 50% of clearwire. in december the company agreed to sell the rest of its shares to sprint for about $3 a share. dish then came in with a higher bid of $3.30 a share in january. last month sprint raised its offer to $3.40 a share in the face of opposition from some clearwire investors. but just a few weeks ago, dish launched a tender offer at $4.40 a share. in a statement iss says that the proposed merger with sprint no longer appears to warrant
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shareholder support as the best available alternative to maximize value. the firm cites the higher offer from dish, the lack of a financing condition for that bid, and also clearwire's determination that dish's offer is actionable. the battle for control of clearwire likely to trudge on despite the latest endorsement for dish. sprint and dish are fighting over whether clearwire can grant some governance rights to dish as part of its tender offer. sprint says it intends to enforce its rights. meantime we're watching shares of clearwire and sprint. take a look, see clearwire up nearly .5%. sprint is down 2% this morning. back over to you. >> thanks. have a good day. the stock markets as we've seen got off to a good start this year. m & a hasn't really followed suit. according to deal logic more deals have already been withdrawn this year than last. it's a theme john jenner from the "wall street journal" picked up on and heard on the street's column. good to see you.
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thanks for joining us. why in the world of m & a have we not followed the up tick in equity markets? what's going on? >> you know, as you pointed out, markets are up across the world. the last two weeks notwithstanding. it's been a little choppy. you would expect there to be confidence among ceos and private equity firms that own these companies. what's happening is they're afraid to pull the trigger because they're not sure these valuations are actually appropriate. if you look back to late last year, a good example that i learned about was blackstone looking to buy a frozen foods company called bird's eye igloo. it was down to the wire. they were within 50 million euros. this is a 4 billion euro deal. >> 50 mill whereon ion is tiny. >> 1%. a little more than that. they couldn't make it happen. they were so tentative about the right price. >> which is sort of extraordinary. that's a deal we know about. what's happening to deals that don't even fwet to that stage?
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>> bankers tell me there are many, many deals that, you know, have never been reported or never announced that made it to, say, the fifth, sixth inning and maybe even later than that. maybe the ninth inning. and the buyers have walked away. for the same reason. if you look especially at the consumer product sector, those valuations have gone through the roof. some of these companies are at all-time high valuations. loreal, clorox, procter & gamble. in that sector it's hard to justify paying that much. there are unusual reasons why the stock is trading at levels. ceos aren't ready to go for it. >> the thing that's interesting about what you write about, you say on the one hand, of course, it's never been cheaper to borrow money. you're actually saying it's actually also stopping deals because it aids those guys who are thinking of selling. >> that's exactly what happened with premierea. they were a seller as i mentioned before with bird's eye
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igloo. they said, we're going to borrow money. they took advantage of loan markets. to this day last i looked are still holding up quite well. >> john, good to see you. still to come, u.s. equities rally. some fears over the fed pulling back on its bond buying program ease for you. we'll preview the trading day ahead and look to next week's fomc meeting. see you in a few minutes. [ male announcer ] i've seen incredible things. otherworldly things. but there are some things i've never seen before. this ge jet engine can understand 5,000 data samples per second. which is good for business. because planes use less fuel, spend less time on the ground and more time in the air. suddenly, faraway places don't seem so...far away. ♪
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just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. [ driver ] and it got his okay on treatment from miles away. it even pulled strings with the stoplights. my ambulance talks with smoke alarms and pilots and stadiums. but, of course, it's a good listener too. [ female announcer ] today cisco is connecting the internet of everything. so everything works like never before. all right. we had a rally yesterday for u.s. stocks. right now we are -- futures is turning around a little bit. still just about above fair value. not by as much as they were. right now indicating a fairly flat start for the u.s. today
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after those 180 point games for the dow yesterday. after a choppy week, let's get the thoughts from the cme. averagejoeoptions.com. good to see you. what do you make of it. we've got our knickers in a real twist this week. >> you take a look at the overall picture. since may 22nd when we had what we call a key reversal, we've been in a short term down trend. if we close somewhere moderate today it will be the third down week out of the last four. you know, we had a natural dead cat bounce yesterday morning that was fueled in the afternoon by some more of that monopoly money from the fed they decided they would let everybody know they were easing, going to bring some more sugar back to them. overall picture is up here around 1640, 1650 in the s&p. i don't see us going much that are they are than that. looks to me the market is trying
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to get into a corrective phase which would be actually natural and healthy for the market here. i think we're probably going to be towards the top at 1640, 1650 and would look for a little selling pressure here. >> we saw the 10-year yield head towards 2.3%. i mean, is everybody just going to keep their eyes on what happens with yields and decide how that impacts everything else? >> you know, we had -- you know, interest rates are rising. the fed decided that they needed to step in. they had to calm the markets yesterday. so we saw late in the afternoon at 3:30 eastern time that the bonds rallied about a full point. which brought down about five basis points. that was all, you know, just strictly on what they said. it was really -- the interest rates are actually better. it's actually going to be more healthy if we can start to get the rates to come off the deck here. we can actually be a more healthy economy. because really the fed is not really creating a lot of liquidity. the banks are creating a lot of
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liquidity to the average investor, average guy who needs to borrow the money. they're only really providing liquidity to the big companies and very wealthy. we need a little bit of a higher interest rate environment so that the banks will actually provide real liquidity to real people. >> consumer sentiment coming out today as well. what's the focus for you? >> you know, i think that, again, we're now going to ignore really what the number is. i think the number will probably be good. sentiment numbers have been very good. i think really the whole market is going to be focused in on if anybody else comes out of the fed today. looking forward to tuesday's fed meeting. >> all right. we'll see what happens. good to see you. have a good last trading day of the week. now, they're going to be out on the course pretty early today. they've got to try and finish up the first round of the u.s. open. this was after play was called off because of darkness
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thursday. phil mickelson shot 3 under. tiger had some trouble on the fairways and greens. he was 2 over. koth pa scott paired with woods and mcilroy. leader, luke donald at 4 under. this was the putt, i think, which took him to that particular mark. the shot of the day, though, good or bad depending on how you look at it was this one from lee we westwood on the 6 hole. missing the green, hitting his ball into the stands where it was caught rather expertly on the fly by a fan. lee didn't seem to be that impressed with it, particularly. i think he was thinking about his shot rather than the catch which i think was fairly impressive. the advantage, of course, of potentially being a baseball fan. more from marion today as well on nbc and hopefully on cnbc.
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that's it for "worldwide exchange." "squawk box" is coming up next.
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good morning. welcome to this special edition of "squawk box." i'm joe kernen along with becky quick. andrew is holding down the fort in ingle wood cliffs. that happened about 15 minutes ago. it's happening again. tiger. we're live at -- tiger? tiger? we're at the u.s. open at the marion golf club. i got a wave out of tiger earlier. >> no, no, no. he was waving at me.
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>> he might have been. a sheepish little wave. he did look up. he did. a little smile. which is, you know, when every single person yells your name as you walk by, we're talking thousands of times a day. we are in ardmore at historic marion, pennsylvania. host of more majors than any other venue. we're just outside of philadelphia. it was raining on the car ride out here. it was raining yesterday. it was raining last week. it was raining on monday. it was raining last friday. anyway, looks like it's going to clear up for the weekend. they're going to get this in. we're watching the leaderboard. more importantly on top of what's moving markets. it's a little quiet today after another sort of an interesting session yesterday that ended out with the fwogood guys on top. futures this morning down two points or so on the dow. can i say good guys when it goes up? you're really not supposed to. >> you want to see the rise of american companies. >> why would people want the we

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